Morning Dairy Comments, 11/23/2015

Monday, November 23, 2015

General Market News

· ***Cold storage report this afternoon at 2 pm Chicago time***

· Argentina elects Mauricio Macri and excites investors

· Pfizer & Allergan headed toward record $150 bln merger

· Eurozone PMI at highest in 4 years

· IW economic institute says German economy will slow next year

· Crude oil approaches $40

· Saudi faces tough choice- cut oil production or drop its currency peg

· Brussels remains on lockdown as they search for terror suspects

· Iran has cut off imports of US dairy products



Class III, Cheese, and Whey

The class III market finished out the week on a mixed note after a slightly bullish milk production report showed both lower milk per cow as well as a continued decrease in total cow numbers. The spot markets both bounced higher on Friday as well with the barrel doing the majority of the work to attempt to get back within the normal historical spread but we are still at 6.75 cents after the blocks gained 1 to $1.57 while the barrels gained 8.75 to $1.5025. Late in the day however the market did move back into the red after trading slightly higher for most of the day. Settlements ranged from +5 to -7 throughout the 2015 and 2016 contracts. The market appears stuck between a rock and a hard place at the moment as butter remains sky high and hasn’t shown any sign of breaking, we should get some Jan demand as a result of playoff football and the super bowl coming in soon as well as the charts being extremely oversold in the nearby months currently on the bullish side. However the bears can point to a spot market that has been under consistent pressure for much of the past two weeks that is currently trading at a discount to the futures market with an equivalent value of ~$14.50 as well as massive inventories. Which brings us to the cold storage report which will be released this afternoon our expectation is for a seasonal drawdown in stocks which seems more likely on the heels of a nearly unchanged milk production report. On the week the Jan to March pack average was down 16 cents to $14.99.

January to March class III daily pack average


Cheese futures finished the week mixed as well but they had more of an upward lean than did the class III futures as settlements ranged from -0.004 to +0.004. The class III weakness then was mostly a result of the softer whey market which settled steady to -0.575 cents on the day. DMN prices continue to be steady to slightly lower for whey and the concentrates and the international market prices continue to be under pressure as well with the EU weekly index falling as well. It’s a difficult task to find bullish influences currently.

The dairy cow slaughter under federal inspection for the week ending November 7th was estimated at 60,300 head, up 1,100 head from the week prior while up 7.9% year over year. Year to date the slaughter is pegged at 2.5222 million head, 4.0% higher that during the same period last year.

We look for class III, cheese and whey to open steady to slightly higher 

Spot Session Results











UP 1







UP 8 ¾







DOWN 3 ¼












Class IV, Nonfat, and Butter Futures

The class IV market finished out the week on a mostly higher note as from Nov through April only the December contract was lower, -10 cents and other months were 5 to 18 higher on the day. After an early week sell off futures finished the week firm. The Jan to March pack average finished the week at $14.10 down 15 cents from the prior week but nearly 30 cents above its intra week low.

NFDM futures were mixed from -1.725 to +1.400 cents on heavy volume of over 200 trades. That came as a bit of a surprise given that the spot market fell by 3.25 cents on Friday and traded down to levels not seen since mid-August our low then was 6.50 cents and it would seem we’ve got a chance to test that mark in the coming weeks. Weekly CWAP prices were soft down 3.31 cents from the prior week to 79.88 cents. International prices continue to fall with the GDT down once again but there was some resiliency late in the week. The Jan to March pack finished at 91.783 cents, down 4.175 cents from the week prior but also nearly a penny and a half above the mid week lows. We’d not be surprised to see a bit of a bounce in the spot market in the short term but futures would seemingly have a much more difficult time maintaining the late week momentum as we continue to carry a sharp premium vs. current spot pricing.

The butter futures finished out the week mixed with nearby months, November down 0.150 and December down 1.00 cents while 2016 contracts continued to see prices move higher. January through December settlements ranged from 0.500 to 3.00 cents higher. For the week the January to March pack average closed at $1.98658 up 6.066 cents from the prior week. The cream multiples last week sky rocketed as supplies have remained extremely tight and despite the expectation that prices should fall seasonally. Time will tell but we begin pricing December this week and the gap between spot and futures will have to begin correcting quickly.

NZX prices opened the week mostly steady with WMP pricing the only market showing price movement and that was mostly higher as you can see in the settlements below. 

We expect NFDM and butter to open a little higher this morning 





A ho hum close to the week as the grain markets fell slightly on Friday, corn down a penny to $3.6325, beans down 2.5 to $8.5750 and wheat down 2.25 to $4.8850. Funds continue to hold short positions of grains but with prices very near the seasonal lows for corn and soybeans farmers just aren’t moving any product and thus far that’s kept the market from breaking out to the downside. Weather in SA has been good as well with good rain coverage expected this week for that area. Given the current fundamentals and extremely slow export pace it’s tough to get bullish but the fund position along with the charts does point to some potential upside in the coming weeks. March corn shows the potential to get back into the $3.75 to $3.80 area and soybeans back to the $8.75 to $8.85 area. See charts below.

Daily March corn chart


Daily January soybean chart


We look for grains to open mixed with corn and soybeans lower while wheat tries to build on yesterday’s move, opening slightly higher 

Unless otherwise noted, the posts on this blog should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. or its subsidiaries. INTL FCStone Inc. is not responsible for any trading decisions taken by persons viewing this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. or its subsidiaries. Reproduction without authorization is prohibited. All rights reserved.

Market Intelligence Free Trial